Volkswagen: The Saga Continues

Our UK-based partner Jennifer Janson at Six Degrees discusses the recent VW news cycle with Airfoil Account Director Jenn Korail, and how the news has been received on either side of the pond.

Insights from Six Degrees

The VW emission-rigging scandal has barely been off the front page since the news broke in September. Whether it’s the impact on the German economy or the erosion of trust across all big business, it seems the news angles are almost endless. But how is the news being perceived across the pond? We thought it would be interesting to take a look at the general tone of reporting both in the UK and US.

We’ll start with the UK. It’s hard to underestimate the esteem with which VW has been viewed in recent history. According to YouGov’s BrandIndex tool (measuring the general impression the public has towards a brand) VW has been in the top 40 brands overall in the UK for the past year, above every other car brand (including German rivals Mercedes and BMW). That’s a lot of potential goodwill built up among general consumers.

Perhaps surprisingly, in a review of the content from 10 articles in top national outlets in the UK over the last month, the word litigation hardly rears its head. Of course there have been passing references to the potential cost of compensation, but it has in no way defined the story. Trust appears to be the biggest issue occupying the pages of Britain’s news outlets. Trust in Volkswagen in particular, but trust in big business as a whole. It seems the Volkswagen story has reinforced perceptions that large corporations will always put profit before people and ethics.

Interestingly for our profession, there has been a significant focus on reputation, and its impact on brand value. It’s widely acknowledged that reputation can account for as little as 25 percent of a brand’s market cap, or as much as 60 percent, depending on who you speak to. An article in PR week said VW has lost 40 percent of its market value since news of the cheating first started to emerge, which seems to reinforce those estimates, falling almost in the middle.

The focus on reputation has, unsurprisingly, led to discussion around corporate governance. A fascinating analysis of the situation (in the FT) pointed out that even the fact that VW feels the need to appoint a panel to examine what went wrong rings all sorts of alarm bells. If an issue can get to this stage and no one internally knew what was going on (if you believe that) then something is definitely broken. It says a lot about the culture.

Very little has been reported about the impact of the emissions themselves with the focus almost entirely on the perceived lie and breach of trust. There have been some outlets, which have focused on the environmental impact, but generally speaking diesel engines are recognised as a very small proportion of overall automotive manufacturing.

[Fig. 1. A cluster of key words taken from 10 articles in leading UK titles covering the emissions scandal over one month]

Insights from Airfoil

Sentiments are not dissimilar on the other side of the pond in the US, though attentions are turning to additional implications of the scandal and Volkswagen’s current tactics aimed at solving for consumer discontent.

Volkswagen of America in particular has offered diesel owners $1,000 in cash and dealer credits, which Forbes reports is $500 million based on the nearly 500,000 cars with emissions-defeating software the company sold from 2009-2015.

If taken at face value, VW’s offer to US-based consumers attempts to make right its widespread breach of trust the company’s leadership claims was the doing of a few bad employees.

But with much of the media focusing on the negative brand and trust implications posed by the scandal, discerning and critical consumers may wonder at VW’s true intentions. In a stereotypically litigious market with class action suits already bubbling over in response to VW’s indiscretions, news outlets, including Forbes, LA Times and others, are questioning not if but what is the catch to the deal – an unfortunate further indication of legal, and ultimately, consumer distrust in the long term implications of Volkswagen’s tactics.

As most communicators know very well, media strongly determine the impact of a crisis on a company, and have power of influence over many stakeholders, including the community, customers, employees, investors, regulators, and others. But exactly where the media will most influence its audiences in the long run as it relates to VW remains to be seen.

The majority of outlets at a broad level continue to discuss the implications on VW’s brand, calling to the carpet the reality behind “German engineering,” a mantra European automakers have hung their hats on globally for decades and what The Washington Post early-on in the scandal called, “the promise of performance and reliability that double as the bedrock of Europe’s most important economy.” And with good reason. German-engineered vehicles have been marketed in the US and beyond as symbols of unmatched quality, the difference understood by the truly discerning eye, excruciating attention to detail, and status. Craftsmanship. Luxury. Performance. These words are commonly synonymous with Audi, BMW and Mercedes.

However, others question the true detrimental long term impact on VW given its worldwide growth and leadership. Wired hones in on the potential detrimental, or unknown, impact on the technology: diesel’s long term adoption and success in the US versus competing technology such as hybrids. It notes VW’s close ties to the resurgence of diesel passenger cars in the US as a factor.

It’s an interesting angle that takes the focus to a higher level as diesel remains a small percentage of the number of vehicles on US roads, with a majority percentage coming from VW sales.

A few things are certain. The VW scandal is going to remain at the top of news headlines for the foreseeable future as more details start to unfold and legal teams, consumers and regulators in the US are faced with making decisions resulting from uncovering the truth and VW’s responses. A few of the most pervasive and emotional intelligence-focused pieces of advice a communicator can give to a company such as VW from a crisis communications management standpoint are:

Deliver candor and transparency.

Consider all your audiences and how you respond versus react. That includes employees and how information and future corporate and cultural practices, are formed and communicated. Internal communications is as important as external, where your employees can be your top brand ambassadors, especially in local communities.

Show accountability at the highest levels of the organization. Sure, VW’s top executives, or the majority of its teams report they had nothing to do with regards to the issue, but what does it say about a company as vast as VW, known for the zealous passion of its internal culture, if one, few, or an entire team of engineers were either willing to deceive, or perhaps pressured, into cheating? How does a corporate culture and global brand recover from that? How do consumers trust a brand, made up of people that have intended to deceive them? Beyond consumers, how does VW overcome the potential cultural backlash as it recruits the next generation of engineering talent? Who will follow a leadership that claims it just didn’t know? There will have to be a plan, or series of plans in place to mitigate the long term legacy of this crisis.

Above all, make every effort to communicate frequently and with care, or empathy, for all audiences. For media, that means understanding the pressures they face when it comes to delivering news fast, accurately and with the need to drive readers to their outlets. For consumers, that means showing you care about them as humans and loyal customers first, as much if not more than you care about the bottom line. How will it choose to invest in the long term future of its vehicles and loyalists? We can see signs of this, but is it enough?

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